MONTPELIER — The city is looking for an additional funding source for its new downtown improvement district after learning that commercial building owners would otherwise face a heavier financial burden for the district than was projected.

The City Council plans to hold the first reading of a proposed ordinance establishing the district tonight.

Voters in March approved a one-time $75,000 allocation for the district based on a special assessment on the owners of all downtown buildings that are entirely or partly in commercial use.

But there are still a few snags in the funding to work out.

“We had a lot of volunteers from Montpelier Alive who went out and made good faith estimates on what it would cost,” said City Manager William Fraser. “But in the end it was going to cost businesses more than what was anticipated, and we want to address that.”

Fraser said that as the city began looking at property values in the district, it became clear the entire $75,000 could not be assessed against owners without increasing their tax rate by 10 cents. Advocates of establishing the district had offered a rate of 4.5 cents in their publicity materials.

Now the city is looking to two revenue sources for the $75,000. The first $40,000 will be raised through assessing a 5 cent tax on commercially used property throughout the district.

Fraser did not have a final figure on the number of buildings that would affect.

As for the $35,000 balance, the city hopes to use an expected increase in the state’s payment in lieu of taxes. Should that additional PILOT funding not reach $35,000, Montpelier Alive has said it will make up the shortfall this year out of the group’s own resources.

The state makes payments in lieu of taxes to communities statewide where it owns significant nontaxable property.

The city expects to receive at least $756,843 in PILOT funding this year that will go directly into the general fund. Under the proposal being put before the City Council, the next $35,000 in PILOT would go toward the downtown improvement district.

Fraser said there is no guarantee the additional $35,000 would become available. But he said he expected at least some, if not all, of the additional downtown funding could come through PILOT this year.

The $75,000, which could start being utilized in early July, is intended to improve the downtown area physically, through amenities such as banners, benches and “parklets,” and to develop and support longer-range plans to tout the city through website development and marketing.

The city will form a committee to oversee the spending of the money, and Montpelier Alive will manage the enterprise.

Fraser added that in the future the district budget proposal will be considered and adopted along with the rest of the city budget, but that it would “probably” remain a separate ballot item. It is also expected that after several years of funding, the district could be included in the city’s charter.